We're winning battle to curb oil glut, says OPEC

Ann Santiago
September 27, 2017

US crude oil climbed 3% today to $52.22/bbl, posting its highest closing level in five months, while Brent crude jumped 3.8% to $59.02/bbl, touching its highest since July 2015.

As well as increased demand, especially from China, Turkey's threat to disrupt oil flows from Iraq's Kurdistan region, helped push up prices on Monday.

Other signs there could be a restriction in oil supplies has also been pushing up prices.

The oil market has been in a downturn for nearly three years.

Investigations showed that the price of oil may stabilise in excess of $55 per barrel in the fourth quarter, especially as many stakeholders, particularly Russia, Azerbaijan, Brunei and Sudan, have made a decision to support the efforts of OPEC in achieving stability.

Oil prices rose on Monday to their highest in eight months after major producers said at a meeting in Vienna the global market was well on its way toward rebalancing. The price quotes are for WTI-MEH, the price of West Texas Intermediate (WTI) Midland crude at the Magellan East Houston Terminal (MEH), Light Louisiana Sweet (LLS), Southern Green Canyon and Louisiana Offshore Oil Port (LOOP) Sour. The deal was extended in May through March 2018 and signatories have recently indicated a willingness to potentially hold back production through next year.

Analysts at Forex.com said the fundamental outlook for oil is getting brighter again but it remains to be seen what the response from USA shale oil producers will be to rising prices.

Nine months of output cuts by the group and its friends have certainly contributed to the higher prices.

Opec and non-Opec members including Russian Federation met in Vienna last week to discuss their deal to cut production by about 1.8m barrels per day (bpd), which runs to the end of March 2018.

"Apart from the bullish waves triggered by the Kurdish referendum, the market genuinely thinks global stocks have started to fall", wrote Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd., in a note Tuesday.

Iraq, OPEC's second largest oil producer after Saudi Arabia, began reducing production in early January.

The energy minister from the United Arab Emirates said the country's compliance with OPEC's supply cuts was 100 per cent.

Analysts said oil prices appeared supported by the growing notion that OPEC member countries will be more disciplined with their production hereon, after experiencing one of the worst price slumps in history from a three-year long glut in world crude supplies.

The Energy Information Administration reported Wednesday that total USA crude production rose by 157,000 barrels a day to 9.510 million barrels while US crude supplies rose by roughly 4.6 million barrels for the week ended September 15.

OPEC officials have said exports have a more direct impact on the global supply than production.

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